The War in Darfur, otherwise known as the Darfur Genocide, is a military conflict in the Darfur region of western Sudan. The Sudanese government has provided support to a large Arab militia known as the Janjaweed, a violent force operating in the region.  The UN estimates that the war has left 200,000 dead from violence and disease. Other non-governmental organizations have estimates as high as 400,000 dead.

As a result, on December 31, 2007, President Bush signed the Sudan Accountability and Divestment Act (the “Act”) into law. The Act aims to pressure the Sudan Government to end the ongoing violence in the Darfur region by encouraging divestment of assets in companies that conduct business in the Sudan. Section 3 of the Act authorizes state and local governments to adopt measures to divest assets from companies doing business in Sudan, despite any other provision of law. Similarly, section 4 provides a safe harbor for investment companies and its employees, officers, directors, and investment advisers by eliminating civil, criminal and administrative actions based solely upon a company’s divestment of certain securities tied to Sudan. In addition, section 4 instructs the SEC to prescribe regulations within 120 days of enactment that require an investment company to disclose its divestments.

The SEC recently issued the proposed rules. See SEC Release No. 34-57306 (accepted comments through March 17, 2008). Specifically, the Commission proposed amendments to form N-CSR and N-SAR that would require a registered investment company to disclose any divestment of securities made under the Sudan Accountability and Divestment Act.

The Act appears to be an attempt by the government to encourage socially responsible investing. Many investment companies have socially active criteria that a company must possess before it decides to invest. Apublic website provides examples of investment companies who have either divested or refused to invest in companies with ties to Sudan. The website calls for investment firms to “Divest for Darfur” and encourages people to contact investment firms and tell them to “stop investing in genocide.”

For primary materials go to theDU Corporate Governance web site.